The Harbor Point TIF makes sense

No project of this scope could succeed without infrastructure subsidies

July 01, 2013|By Tim Pula | By Tim Pula

Harbor Point, 27 acres of mostly vacant land on the Inner Harbor, is poised for one of the most significant developments in Baltimore's history. After losing 300,000 residents and many businesses during the past 40 years, Baltimore needs to grow its corporate and middle class populations to become more financially stable. Harbor Point alone won't do that, but it can move Baltimore in that direction.

Debate has surrounded Harbor Point's proposed use of tax increment financing (TIF) to pay for its public infrastructure. Yet this debate has been full of misconceptions. Lost is the reality that the vast majority of the infrastructure we use daily was funded by local government. The street you live on, the ones that get you to work, school or shopping, the pipes that bring water into your house and waste out were all made possible by taxpayer-funded infrastructure. Historically, such work was funded by every taxpayer through local governments' general funds. The Harbor Point TIF will provide the benefits of public infrastructure but limit the payment for it to the taxpayers at Harbor Point.

One side of the debate has repeatedly referred to the TIF as tax rebate or tax abatement. While Harbor Point is eligible for tax abatement through both the Brownfields and Enterprise Zone tax credits, the proposed $107 million TIF is not a rebate or abatement of Harbor Point's annual tax liability. Rather, it is just the opposite, as it requires taxes to be paid in order to service the TIF bonds.

Others have suggested that Harbor Point will not start paying property taxes until 2023. This is impossible given that Harbor Point is currently paying property taxes of approximately $350,000 and by law has to keep paying these "base taxes" throughout the life of the TIF. The "base taxes" go to the city's general fund to support police, firefighters, schools and other basic services and are not used to repay bonds. Those payments come from taxes generated by the increase in value as a result of the development.

It should be noted that the developer and every tenant at Harbor Point will be liable for paying a "special tax" if a situation arose in which the new taxes generated by the development were not enough to make the required bond payments. All leases and sales contracts will require that tenants and owners agree to this.

Some have questioned the use of TIF to benefit what they characterize as a glitzy waterfront development for the wealthy, and why such tools are not used in other city neighborhoods. First, public infrastructure is a benefit that accrues to all citizens, whether rich, poor or middle class. Second, there are thousands of miles of taxpayer-funded infrastructure throughout Baltimore, servicing a great diversity of people. Not all of that infrastructure is in great shape, but that's a topic for another day. Further, TIFs have been used throughout the city: Frankford/Moravia, Belvedere Square, Mondawmin Mall, East Baltimore Development Inc. and Charles Village.

TIFs are more easily used in tandem with developments where public infrastructure doesn't exist and with one or few land owners involved. They are only feasible when enough incremental value can be created to produce the new tax revenue needed to repay the TIF bonds. While theoretically a TIF can be used within existing neighborhoods, say to repair infrastructure or build a new school, it is much more difficult to put together, as every land owner in the neighborhood would have to agree to subject themselves to special taxes and to guarantee repayment of the TIF bonds. Further, each of these owners would have to front their share of the costs to establish the TIF, which by law are not paid by the city.

Finally, it is important to note that Harbor Point is projected to pump $588 million of new tax revenues into Baltimore City's coffers during the 34-year life span of the TIF, a piece of information that rarely is mentioned by the detractors.

Harbor Point is a tremendous opportunity for growth that Baltimore needs to seize. It deserves to have the same public infrastructure that other neighborhoods throughout Baltimore have benefited from. The big difference is that Harbor Point's infrastructure will be paid for by Harbor Point taxpayers and not all of the taxpayers of Baltimore.

Tim Pula has a master's degree from the University of North Carolina in Urban Planning with concentrations in real estate development and land use planning. He has managed numerous development projects in Baltimore including the Bagby Building, the Stieff Silver Building, and Clipper Mill where he implemented Baltimore's third TIF. His email is tim.pula@gmail.com.